According to the characteristics of parallel hybrid electric vehicle, a three-parameter economy shift algorithm for hybrid electric vehicle was proposed without degrading the vehicle dynamic performance. In the upshift algorithm and driving mode downshift algorithm, engine torque, motor torque and vehicle speed were used as the shift parameters. In the braking mode downshift algorithm, motor braking torque, mechanical braking torque and vehicle speed were used as the shift parameters. Calculation results show that, compared with the two-parameter shift algorithm inherited from conventional vehicles, the three-parameter economy shift algorithm for hybrid electric vehicle can save fuel consumption in driving mode and increase regenerative efficiency remarkably in braking mode.